UK Government Lost £21 Billion to Fraud Since Start of COVID-19 Pandemic: Watchdog

Models of a man and woman stand on a pile of British coins and bank notes, in this file photo dated Sept. 11, 2018. Joe Giddens/PA Media

The UK government has lost around £21 billion ($26 billion) due to fraud since the start of the COVID-19 pandemic and is “very unlikely” to recover the losses, according to the National Audit Office (NAO).

In its latest report published on March 30, the spending watchdog revealed that the amount of fraud in UK government expenditure rose from a total of £5.5 billion in the two years before the pandemic to £21 billion in total in the following two years.

Of the £21 billion, £7.3 billion relates to the government’s temporary COVID-19 schemes for individuals and businesses, including the £70 billion Coronavirus Job Retention Scheme, commonly known as furlough, which supported 11.6 million UK workers over 18 months.

Rishi Sunak, then chancellor of the Exchequer, speaks during a virtual press conference after announcing a new three-tier COVID-19 alert system, inside 10 Downing Street, in central London, on Oct. 12, 2020. Toby Melville/Pool/ AFP via Getty Images

The NAO warned that it is “very unlikely” that most of the taxpayers’ money will be recovered.

These estimates are in addition to an estimated £10 billion of tax revenue lost to evasion and crime every year.

The report also said that the Department for Work & Pensions (DWP) “generated fraud and error savings of £500 million through its retrospective review of Universal Credit claims made over the height of the pandemic, but at least £1.5 billion of fraudulent claims that started during that period were still being paid in 2021–22.”

The DWP is now “planning targeted case reviews to detect and recover as much of the rest as it can,” the NAO said.

The watchdog said that the creation of the Public Sector Fraud Authority (PSFA)—which was established last year in response to concerns about fraud during the pandemic—represents a chance for a “renewed focus on fraud and corruption.”

But the report warned the authority needs to be “influential across government if it is to achieve the required changes in culture, preventive approach, and robust assessment of risks.”

Vulnerability to Fraud

According to the NAO, the government’s vulnerability to fraud increased due to its response to the pandemic.

It said that many public bodies are unaware of the amount of fraud and corruption they face and cannot show that they are tackling it effectively.

The watchdog found that public bodies could have better managed the fraud risk without impairing their emergency response. These include faster transparency, better management of conflicts of interest, addressing known vulnerabilities more quickly, and timely financial reporting.

The report found that “most departments have only limited counter-fraud and corruption capability and cannot demonstrate that it is proportionate to their risk.”

The NAO called on government departments and public bodies to act as “one government” when tackling fraud.

Gareth Davies, the head of the NAO, said: “There has been a substantial increase in the level of fraud reported in the annual reports and accounts we audit. In addition to the loss of taxpayer money, it creates the risk that people come to perceive fraud and corruption across government as normal and tolerated. If not tackled, this could affect public confidence in the integrity of public services.

“Government has more to do to understand the scale of the problem it faces and cannot yet demonstrate that it is tackling fraud effectively. The creation of the Public Sector Fraud Authority creates a real opportunity to address this.”

‘Dereliction of Duty’

The main opposition Labour Party criticised the Conservative government for failing to tackle fraud and corruption.

Labour’s deputy leader Angela Rayner said: “Fraud and corruption have run rife on the Tories’ watch but they are utterly failing to tackle it.

“This government have completely abdicated their responsibility to crack down on this criminality, leaving public bodies without the resources to combat it effectively and protect the public’s money. It is a total dereliction of duty.

“While fraud spreads like wildfire with billions of taxpayers’ money going missing, ministers are incapable of getting a grip and undermining public confidence further still. While taxpayers are left counting the cost of the Conservatives, Labour has a plan to prevent fraud, punish the criminals, and protect our communities.”

In response to the report’s findings, a government spokesperson said: “We are overhauling how we tackle public sector fraud to ensure we chase down every pound stolen from British taxpayers.

“Since 2021, we have invested more than £900 million in taking action on fraud and, as the report acknowledges, we have made progress by establishing the Public Sector Fraud Authority, which is stepping up the government’s efforts to protect taxpayers’ money.

“The government has recovered more than £3.1 billion of fraud losses in the last two years, including within COVID-19 schemes, but we know there is more we can do.

“That is why we are expanding the government’s Counter Fraud Profession, developing new technologies, and boosting skills and training to further protect the public purse.”

PA Media contributed to this report.